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Furthermore, the use of cost cap tariffs is not limited to the telecommunications market.
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In our empirical analysis, we can confirm such a cost cap bias, which exists over and beyond the rational choice of cost cap tariffs.
Her plan includes out-of-pocket cost caps, using America's "bargaining power" to demand lower prices and higher rebates, and increasing competition with proposals that would encourage the release of more generic drugs, such as clearing the FDA's generic drug approval backlog.
(CC consumption) A rational consumer of a cost cap tariff will never (expect to) consume exactly at the level at which the cost cap becomes binding.
We focus on the realistic case where the marginal price of the cost cap tariff is not smaller than the marginal price of the pay-per-use tariff and where the cost cap level is at or above the price level of the flat rate.
At the time, this pricing was such that the minute price of the cost cap tariff exceeded the common market price for pure pay-per-use tariffs (0.09 €/min) while the cost cap was set at the level of comparable flat rate plans.
For comparison, the cost cap of the MIDEX mission is $135M.
For example, a cost cap tariff consists of a linear pay-per-use segment (i.e., from zero consumption until the cost cap is reached) and a linear flat rate segment (i.e., any consumption beyond the cost cap).
Cost cap tariffs are pay-per-use tariffs for which costs cannot exceed a predefined cost limit.
Intuitively, just below the cost cap level, the consumer would rather use the CC tariff like a flat rate because the negative effect of slightly higher costs is over-compensated by the positive effect of a much higher consumption level.
The current cost cap (which includes cost of launch vehicle, development and operations) is $75M (Fiscal Year 2000 $US).
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